subject: Refinance Your House: Study Home Loan Subordination [print this page] Refinance Your House: Study Home Loan Subordination
There are several various terminologies you will have to become familiarized with if you have ever considered refinancing the loan on your home. The two main elements involved in the house refinancing process are reducing your interest rate while simultaneously helping reduce your month-to-month home loan payments by putting in an extra secondary loan. Included in this loan refinancing jargon is the terminology subordination.
If you already have two loans on your house, this is where subordination becomes applicable. Subordination requires your first lender to contact the secondary lender to notify them that the refinancing procedure is taking place on the primary loan. The notification is basically a request by the first lien holder, asking the secondary lien holder to accede to continue to be inferior in repayment priority while the refinancing is taking place.
Plainly, the secondary lien holder has the privilege to shift into first lien holder position under certain circumstances if you're thinking of refinancing your primary mortgage without paying off your already-existing second loan or, in the alternate, a line of credit. This information is relevant first in the event that your primary mortgage's refinance ends up not paying off the secondary lien or credit line. The secondary lien holder could shift into the first lender place in that instance.
Another illustration of when the secondary lien can move into primary position may be when the primary lien holder never makes a request to subordinate. The first lien holder must make this appeal, asking the secondary lien holder to remain in a subordinate position even if the refinancing is happening and even when it is finished. If the first lien holder neglects to do any appeal, the secondary lien holder has the option to move into a position superior to the original mortgage lien holder.
The house refinancing procedure is thus very directly related to the concept of subordination when there are two home loans in existence on a single property. When it is subordinated during the refinancing procedure, your home equity loan is also kept open and accessible. In addition, subordination can be an advantage because the fees are radically lesser than the cost of needing to open an entirely new credit line when it has already been closed.
